The Russian Federation has asked Lloyd's for advice in setting up a free insurance market to begin operating in Moscow before the end of this year.

Detailed discussions have been underway between Lloyd's and Rosgosstrakh, the Russian state insurance company, aimed at securing Lloyd's access to any future market in exchange for expertise and guidance.

It is understood David Coleridge, the outgoing chairman of Lloyd's, wrote a letter to the former Russian Prime Minister, Yegor Gaidar, on 6 December that said: 'I can confirm that Lloyd's wishes to co-operate fully in the future with your supervisory and inspection authority as well as with your insurance specialists. Co-operation can, of course take many forms, and between us we need to ensure that we concentrate on those forms which will stimulate the most effective growth.'

Lloyd's was anxious to become involved in the development of a Russian market at an early stage to ensure that any legislation framed did not exclude its involvement in the future. Such legislation, which includes proposals on regulation that would be vital before Lloyd's could consider reinsuring the Russian market, was passed by the Russian parliament before Christmas.

In turn, the Russians are keen to learn from the 300 year-old British market. Before the Soviet Union disintegrated, it had two state insurance companies, Rosgosstrakh, which dealt with domestic insurance, and Ingosstrakh, which provided international cover.

But the Russians have no experience in broking or the formation of private associations of underwriters.

Howard Hill, managing director of General Commercial Services, which is representing Lloyd's interests in Moscow, has been holding talks with Yuri Bugaev, the head of Gosstrakh, the state insurance inspectorate.

At the end of a series of apparently successful meetings Mr Bugaev wrote to Barry Gibson, head of Lloyd's International Department, saying: 'We would like to express our interest in long-term co-operation with Lloyd's . . . In connection with this, we suggest that a programme of co-operation is draw up in the first quarter of 1993.'

Mr Hill, who is helping the Russians to organise an insurance conference in Moscow in April, said: 'Things appear to be moving very fast. The Russians are great admirers of the Lloyd's market and are keen to absorb some of its practices. Lloyd's has agreed to co-operate and provide advice and assistance in return for access to the market should it want it in the future.

'There is no question at this stage of Lloyd's involvement in the market. It is unclear whether its constitution would allow investment as it is an association of underwriters, not a company. So far, access has been assured and Lloyd's has achieved its objectives.'

No one knows how big the Russian insurance market is, but last November an insurance deal was struck that guaranteed foreign investors greater security. Then, the value of projects under way that needed insuring was estimated at dollars 40bn ( pounds 26.5bn). The establishment of a properly regulated market in Russia would lead to extra business at Lloyd's through the reinsurance of the Russian market. The business would be welcome; Lloyd's had losses of pounds 2.06bn in 1989, the latest documented year.

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